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Oil Slump Weighs on Energy Shares

Oil Slump Weighs on Energy Shares Oil Slump Weighs on Energy Shares

Asian stock markets teetered near their weakest levels in three weeks on Tuesday, as a rout in oil prices to near seven-year lows knocked global energy company shares and commodity currencies.

MSCI’s broadest index of Asia-Pacific shares outside Japan fell 0.4%, erasing all the gains made so far this month, with resource-heavy Australian shares leading decline with a fall of 0.9%, Reuters reported.

Japan’s Nikkei bucked the trend, rising 0.3%, after revised data showed Japan had dodged a recession in the third quarter, with GDP up an annualized 1%, compared to a preliminary reading of a 0.8% fall.

Global oil benchmark Brent crude futures dropped 5.4% to $40.66 per barrel on Monday, after the Organization of the Petroleum Exporting Countries’ policy meeting on Friday ended without an agreement to lower production.

Keeping production at near record levels in an oversupplied market has spooked investors grappling with reduced demand from China, the world’s biggest energy consumer.

Brent fell below its August trough to hit its lowest level since February 2009, when the world’s economy was mired in the deepest downturn since the Great Depression of the 1930s.

US crude futures fell to as low as $37.50 per barrel, also hitting a near-seven-year low. The plight of oil market hit energy shares on Wall Street hard. S&P 500 lost 0.7% to 2,077.07, led by 3.7% decline in the S&P energy sector energy index.

Commodity currencies were another victim, with the Canadian dollar hitting a 11-1/2-year low of C$1.35 to the US dollar, falling 1% on the day on Monday.

The Australian dollar also lost steam, slipping to $0.72, from a 3-1/2-month high of $0.74 touched on Friday.

Among emerging market currencies, the Colombian peso fell 3% to a record low.

The euro was on the back foot as the short-covering rally following last week’s less-than-aggressive stimulus from European Central Bank had run its course. The common currency stood at $1.08, having slipped from its one-month high of $1.09 set on Thursday. The yen was little changed so far at 123.25 per dollar.

The offshore Chinese yuan traded at a three-month low of 6.47 per dollar.

The 10-year US debt yield fell to 2.23%, off one-month high of 2.35% touched on Friday following strong US employment data.

Financialtribune.com